Costa Rica: A paradise of opportunities for foreign investments

Infrastructure is still one of the pending issues that Costa Rica has. To what is the delay due and what should be done to catch up?

There have been investments done in the road infrastructure issue, but unlike other Central American countries, Costa Rica counts with a booming economy that makes demand greater, and therefore the public administration needs to solve a series of road network problems. That is, the same economic activity of the country demands more investment from the state.

We enjoy the Public Works Concession Law, a legal instrument to involve the private sector in the country’s infrastructure problems. That has allowed, for example, for the country to count with private participation for the Juan Santamaría airport, the country’s main airport, as well as roads and other works like the future construction of Moín’s Container Terminal, which have been a result of this law’s framework.

The problem is more in the fiscal sector, in public resources to make the necessary investments. And the solution that we have been applying is the private sector’s involvement. Although it is important to highlight that the Public Works Concession Law’s practice has been slow.

The President has highlighted the importance of alliances between the public and private sectors. How is it decided which projects are given in concession?

Our administration counts with a National Planning Ministry, an entity that has a National Development Plan that has a series of projects defined for 2018 and 2035, primarily. There are establish a set of priorities where it is identified which type of investment should the country be valued to promote them through private participation.

Note that our concessions law has a weakness and that is that it does not treat the concept of Public-Private partnership very clearly; a concept where the state and the private sector develop projects together and where somehow there is the possibility for the state or the private sector to contribute for development. Up to now, the experiences that we have had in the country are that the private sector is whom designs, constructs, finances and exploits the infrastructure. And because of the difficulties of not having enough resources, the option of a public-private partnership is very appealing to the state.

Another method provided by our law is the use of a shadow toll, which is applied when an investment is too expensive for the public to pay toll, so the state provides part of that toll. That prevents for the private sector to go on their own and have to take all responsibility.

In this new administration, we talk about the legal instrument’s assessment, which will be given due practice and rethink one of the concession methods which is the public-private partnership.

Specifically, why is this public-private partnership beneficial?

Public works’ budgets are extremely high. In the previous administration, the expansion of Route 1 - San José with San Ramón - was completed, for which the tolls’ estimated costs for the use of this road were exaggeratedly high according to the users, which are the people living to the west of the central valley. They organized themselves immediately, there were protests and they wouldn’t accept the route’s concession. That made the public administration decide to cancel the concession process. And they opted for a shadow toll in order to balance and distribute some responsibilities.

Do you think that state support must be promoted in the private sector?

One of this administration’s goals is to relaunch the concession figure, since there has been many mistakes done in the past. We have signed contracts without counting with the necessary expropriations that were required and it delays significantly the beginning of construction works. This has a very negative effect with the public, because it begins with a contract and then come annexes, changes and price adjustments. We want to then clean up the concept and relaunch it, so that subscribed contract count with all the previous conditions to make an execution order, which means that an effort should be done in order to have all the expropriations before signing a contract. On another side, we should have all socio-environmental valuations from each project prior and approved by SETENA - National Environment Technical Secretary - to sign any contract.

How important is transparency in the bidding process?

We count with a recruitment legislature and the same of concessions are instruments that guarantee transparency. The problem is in the process’ disorganization. Contracts are being made without prior requirements, which gives users a negative image. This is why possible elements of corruption begin to appear, since a project begins costing 300 million dollars and after five years, when you now have the prerequisites, it ends up costing 30 or 40% more. This is why users are sometimes doubtful of the project’s transparency. And one of this administration’s ideas is precisely to demand - by reforms - that all requirements are up to date before certain bidding processes.

What opportunities does Costa Rica offer to American private companies?

There are many, and history has said so. For private participation and particularly the American one, Costa Rica represents a great destination. The same Public Private Association offers great opportunities since when the Concessions law was enacted in the nineties it was made thinking solely in granting vial public works, it was limited to open to other development areas and right now the country needs and wants that participation in many sectors. Which means that we have a lot to do in public infrastructure, specifically public offices, which is precisely the aspect on which the government is criticized nowadays for all it spends in renting public offices. One option to solve this would be the public private participation in constructing public buildings, where the state could pay periodically and in a term of 25 years the buildings would then belong to the state.

Another key sector is the water and sewage system, that although we have made great environmental achievements we have had serious problems in water treatment. And we know that this is an area in which the United States has a lot of experience, especially in aqueducts and potable water services.

Also in the construction of prisons, there was a time on which we tried to allow private participation in the construction of prisons since we have serious problems of overpopulation in them. And if there is no money to invest and improve the situation, the private sector can through royalties give facilities to the state so that it can keep them at the end.

The same goes for the construction of schools, hospitals, to properly equip them and maintain them. These are high cost works which are difficult for the government to assume with its current resources.

What is this council doing to bring more investments and apps?

This government is rethinking that it should not stall in the transport sector alone. We have to make an effort to reposition and strengthen the construction tool in different areas. Sadly, this council, like it happens to all public institutions, keeps growing and forgets its reason of being. In this case, it is promoting and encouraging projects in the different areas. And it is something that has not been done, even though it would be the one thing to solve our problems. We have to make a reset and begin operating the way we should. At the end of 2014, the National Concessions Council needs to have clear idea of what will be the legal modifications for it to become an office that promotes business between the private and public sector.

How important is this council’s role in the country’s socioeconomic development?

It is essential in a country that does not have enough resources to invest in infrastructure. In 2010, it was estimated that we would need an investment of $60 billion dollars in the next 10 years, which means 2020 – an amount that we cannot afford. Therefore, it is certain that we require the private sector’s participation.

Project Director: Vanessa Massimini
Editorial Director: Matteo Transtevere